I'm a former senior editor at Fortune Small Business magazine, and I have written about entrepreneurship for publications such as Crain's New York Business, Fortune, Money, Working Mother, CBS MoneyWatch, and Good Housekeeping. I'm also co-founder of 2ookfreelancer.com, a community for indie professionals looking to build a thriving business in today's crazy economy.

The Secret To Winning Government Contracts Isn't What You Think

Government contracts may be lucrative for big companies, but for many small businesses, they’re not. That’s because few small firms win them at all. Only 22.5% of federal contracts go to small businesses and a dismal 4% are awarded to firms owned by women, according to statistics from the U.S. Small Business Administration (SBA) from 2012.

That doesn’t mean these deals are not worth going after. They can be very lucrative–or you wouldn’t see so many big companies going after them. For women entrepreneurs, winning such contracts is a well-tested way to create a high-growth business, according to research by American ExpressAmerican Express OPEN, which found that 42% of women-owned small business contractors generate annual revenue greater than $1 million.

What separates the small firms that win government contracts from the ones who don’t? Recently I had a chance to speak with Julie Weeks, president and CEO of Womenable, a research advisor to American Express OPEN. Here are some tips for would-be contractors that may help you if you’re hoping to land a big government agency for a client.

Prepare to invest. Winning a government contract takes more prep work than you may think. Women-owned firms that succeed in winning contracts devote an average of $112,000 in time and money preparing to go after them, according to Weeks. For male-owned firms, the investment is even higher: about $137,000. Of course, this is all relative. If you’re chasing a big contract that you win, whatever you spend could pay for itself several times over.

Tailor your services. Federal agencies don’t limit their purchases to things like airplane parts. However, it’s not always easy to sell what you offer, whether that is meeting planning services or a book you published. Success contractors adapt what they sell to federal requirements.”You have to be selling what a federal agency is buying,” says Weeks. “Not all businesses are the right kind to be selling to a federal agency.”

Find a mentor. Try attending networking events and information sessions for contractors that government agencies hold, so you don’t have to wade through all of the fine print on your own. “When you don’t know someone who has been in federal contacting, it’s much harder to figure out if there’s something for you,” says Weeks. The SBA offers a program for women entrepreneurs called ChallengeHer that will be holding events across the country this year. The SBA is collaborating with Women Impacting Public Policy, which has pushed for greater acces to government contracts for women entrepeneurs, and American Express OPEN.

Diversify your clients. Among small businesses that are active federal contractors, 19% of revenue comes from federal government contracts, on average, while 14% comes from state and local contracts. One reason to vary your clients is it insulates you against cutbacks in any one agency.

Try again. When asked how frequently they had bid on a prime contract or subcontract over the last three years, women business owners who had won active contracts had put in five prime contract bids and three subcontract bids.

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I guess beauty is in the eye of the beholder, but 22.5% you reference equates to about $122 Billion dollars in federal contracts going to small businesses. The 4% you quote for women business equates to about $20 Billion – which isn’t my definition of dismal. And the government’s mandated goal is to award 5% of its federal contracts to women owned small businesses (WOSB) so the contract dollars should increase. Agencies routinely set-aside contracts that only qualified WOSB can bid on. I agree that pursuing federal contracts is serious work, but it is possible for women owned small businesses to compete, especially if they sell commercial products or services. WOSB should look for set-aside contracts advertised on fbo.gov, as well as Simplified Acquisition Procedure (SAP) solicitations, as they may be easier to respond to than the traditional government Request for Proposal. Another avenue is obtaining a GSA contract, which allows a business negotiate a contract with pre-approved terms and conditions and then sell to any agency of the Federal government (and sometimes state and local agencies as well). Agencies can buy from GSA contractors very quickly compared to other federal acquisition processes and it gains the firm access to some exclusive bid opportunities. The government has taken an interest in WOSB’s and the latest program is just a few years old, but I believe progress is being made. Robert Kelly, TurboGSA